Mittet v. Home Ins. Co.

• Decision Date: 01 February 1926
• Docket Number: 5668.
• Citation: Mittet v. Home Ins. Co., 49 S.D. 319, 207 N.W. 49 (S.D. 1926)
• Parties: MITTET et al. v. HOME INS. CO.
• Court: South Dakota Supreme Court

207 N.W. 49

49 S.D. 319

MITTET et al. v. HOME INS. CO.

No. 5668.

Supreme Court of South Dakota

February 1, 1926

Appeal from Circuit Court, Jackson County; John G. Bartine, Judge.

Action by Andrew Mittet and another against the Home Insurance Company. From a judgment for plaintiffs, and an order denying a new trial, defendant appeals. Reversed and remanded, with instructions to enter judgment for defendant.

Stephens McNamee, O'Keeffe & Stephens, of Pierre, for appellant.

Johnson & Johnson, of Pierre, for respondents.

MORIARTY C.

This action was brought by the respondents for the recovery of the value of a car lost by theft, and upon which appellant had issued a policy of automobile theft insurance.

There is practically no dispute as to the facts, which are as follows:

On May 12, 1921, the appellant issued a policy of automobile theft insurance in the sum of $1,500 upon a certain automobile owned by respondent Andrew Mittet. The respondent George A Morse, Inc., had an interest in the property insured by reason of a balance due it upon the purchase price. The insurance policy sued upon contained the following provisions:

"Exclusions:

(2) It is a condition of this policy that it shall be null and void:

(a) If the automobile described herein shall be used for carrying passengers for compensation, or rented or leased, or operated in any race or speed contest, during the term of this policy.

This policy is made and accepted subject to the provisions exclusions, conditions, and warranties set forth or endorsed hereon.

Conditions:

(4) The uses to which the automobile described is and will be put are private use and business calls, excluding commercial delivery."

On August 21, 1921, the automobile covered by the policy was taken by an adult son of Andrew Mittet to be used for conveying a passenger from Andrew Mittet's farm near Stamford, S. D., to Martin, S.D. The transportation of this passenger was undertaken for hire, although no compensation therefor was ever actually collected. Andrew Mittet did not know that the car was being taken for this purpose, and had never given consent that his son should use the car for conveying passengers for hire, nor had it been used for that purpose on any previous occasion. While on the trip from Stamford to Martin, O. A. Mittet, who was driving, stopped the car and went back a short distance to get some water for the radiator, leaving the passenger seated in the car. About the time the driver was dipping the water the passenger started up the car and drove away. Neither the car nor the passenger was seen again by any one interested in the recovery of the car.

Respondents demanded payment of their loss, which demand the appellant refused on the ground that the automobile was being used for carrying a passenger for hire, and that the policy was rendered void because of such use.

The case was tried to a jury. At the close of the plaintiffs' case the appellant moved for a directed verdict. This motion was denied and the case submitted to the jury, upon instructions to which appellants noted several exceptions. The jury returned a verdict for the full face of the policy, and judgment was entered thereon. Appellant moved for a new trial, and the motion was denied, and from the judgment and the order denying a new trial this appeal is taken.

While appellant's counsel have presented and argued several assignments of error dealing with the trial court's instructions to the jury, there is no question raised by these assignments that was not raised by appellant's motion for a directed verdict.

The trial court, in denying appellant's motion for a directed verdict, and in giving its instructions to the jury, evidently proceeded upon the theory that, even though the car was being used for a purpose specifically excluded by the terms of the policy, that fact would not prevent recovery if it was so used without the affirmative authorization of the owner. In its instructions the court used these words:

"If you believe then from the evidence that the plaintiffs were diligent in an effort to keep this car from being used for livery purposes for hire under all the circumstances surrounding the entire transaction, then they could not be prevented from recovering, even though a son of one of the plaintiffs might have used it for that purpose at the time of its loss."

This theory of the trial court, and the facts as shown by the record, raise two questions upon which the adjudication in this case must depend:

First. Would the manner in which the property was being used at the time of its loss be such breach of the terms of the policy as to prevent recovery, had the owner authorized or knowingly permitted such use?

Second. Would the fact that the owner did not authorize or knowingly permit the car to be used to carry passengers for hire prevent the forfeiture which would otherwise result from such use?

To allow what appears to be the more logical discussion of these questions, we will first consider the question whether lack of the owner's knowledge or consent will prevent the avoidance of liability where the insured property is put to a prohibited use.

An insurance policy is a contract, and the parties to such contract are bound by the terms of their contract, as are the parties to other contracts. The contract in this case specifically provides that the policy shall be null and void if the automobile shall be used for carrying passengers for compensation. This was an exclusion which the insurer had a legal right to make. There is nothing ambiguous in its terms requiring construction by the courts. It is the use and not the owner's consent to the use that is prohibited.

"In the absence of statutory provisions to the contrary, insurance companies have the same right as individuals to limit their liability and to impose whatever conditions they please upon their obligations not inconsistent with public policy." 14 R. C. L. 929, cited with approval by this court in Miller v. Queen City Ins. Co., 47 S.D. 379, 199 N.W. 455, 35 A. L. R. 263.

It was the duty of the insured to see that the property was not used in such manner as to cause a breach of the conditions. The question of how much or how little diligence the owner uses is absolutely immaterial where the exception is absolute, as in this case, and an actual breach occurs.

This question has been considered quite frequently in connection with prohibited use of buildings, provisions for avoidance of the policy in case of vacancy and use or storing of certain substances. Where the exclusion is absolute, as in the instant case, it undoubtedly becomes a promissory warranty, and a breach thereof is not excused by lack of knowledge or lack of consent on the part of the insured. 19 Cyc. 727; Joyce on Insurance, § 2222; Wood v. American Automobile Ins. Co., 109 Kan. 801, 202 P. 82; Matson v. Farm Buildings Ins. Co., 73 N.Y. 310, 29 Am. Rep. 149; Norwaysz v. Thuringia Ins. Co., 204 Ill. 334, 68 N.E. 551; Cooley's Briefs on Insurance, 1497; Schuermann v. Dwelling House Ins. Co., 161 Ill. 437, 43 N.E. 1093, 52 Am. St. Rep. 377; Insurance Co. v. Gunther, 116 U.S. 113, 6 S.Ct. 306, 29 L.Ed. 575; and Leonard v. Northwestern National Ins. Co., 53 Ann. D. C. 343, 290 F. 318.

In the case last above cited the federal court says:

"Whether a warranty has been broken can never depend on the knowledge or ignorance of the party making it touching the facts constituting the breach."

Undoubtedly this is the rule established by a great preponderance of authority.

The respondent Mittet testified that he and his son, O. A. Mittet, had an agreement that the latter was not to use the car for livery purposes. Therefore they had an understanding that O. A. Mittet was to use the car. He was the licensee of the owner. It was the owner, and not the appellant insurance company, that trusted O. A. Mittet to keep within the limits of the agreement and not breach the policy.

The instructions given by the trial court to the effect that if respondent Mittet had been diligent in an effort to prevent the car being used for livery purposes he could not be prevented from recovering, even though his son was using it for that purpose at the time of the loss, was reversible error, and, if this were the only question to be considered further...